Budget-Conscious Customers Are Abandoning Wal-Mart For Dollar Stores

Dollar stores are beating Wal-Mart in the competition for budget-conscious customers.

Wal-Mart's merchandise has been "piling up because consumers have been spending less freely," Renee Dudley at Bloomberg reported last week. The company is also preparing for a tough holiday season.

Meanwhile, Dollar Tree is opening legions of stores and increasing traffic and sales at a rapid pace.

"Dollar stores are winning, while Wal-Mart is having to cut orders," Brian Sozzi, chief equities strategist at Belus Capital, told us. "This sends a strong economic message because dollar stores are getting the middle-income customers who can't afford to go to Wal-Mart."

It will take nearly a decade to return to pre-recession job levels based on growth in August, Sozzi told us.

"These are the folks who may not even know what the Federal Reserve is, and their only concern is finagling a budget so the entire family could eat each week," Sozzi said.

Dollar Tree CEO Bob Sasser credited the bad economy with the company's stellar results in the second quarter.

"In our current economy, with customers facing stubbornly high unemployment, unpredictable fuel prices and higher taxes, people continued to look to Dollar Tree," Sasser told investors.

Wal-Mart has recently taken serious action to fight dollar stores.

The retailer started offering smaller sizes of household items like toilet paper so people could buy smaller quantities as their paychecks ran out, the New York Times reported last year.

Walmart is also planning on building more than 240 stores under 50,000 square feet by the end of this year. The industry has speculated that the smaller stores will allow Wal-Mart to operate more like Family Dollar and Dollar Tree.

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SEE ALSO: Why Bananas Are The Best-Selling Item At Walmart

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